Stifel Financial Corp.’s broker-dealer unit has seen yet another unfavorable outcome in an industry dispute, and on Friday a three-person arbitration panel ruled Stifel Nicolaus & Co. Inc. pay $7 million in legal costs of advisors who left the firm in 2023 and then were sued by the firm.
It’s the latest significant legal dispute in which Stifel has not prevailed in arbitration under the aegis of Finra Dispute Resolution Services. Just last week, a Finra arbitration panel stunned the financial advice industry and awarded clients of Stifel $132.5 million in damages and legal fees in a dispute centered on a star broker in Miami, Chuck Roberts.
One senior industry executive noted that Stifel may be facing a run of ill luck over such legal claims. “These arbitration awards can go in cycles,” said the executive, who spoke confidentially to InvestmentNews.
A spokesperson for Stifel on Monday did not return a call seeking comment.
This most recent dispute centered on a group of Stifel financial advisors who left the firm two years ago to a recently launched registered investment advisor, Sapient Capital, according to the award. The hearing site was Indianapolis.
Sapient Capital opened in 2023 and has $11.4 billion in total assets. Stifel’s complaint targeted James Knall, who had worked at Stifel from 2005 to March 2023, and five other ex-Stifel advisors who are now registered with the Sapient RIA.
Knall is partner and managing director at Sapient Capital, according to the firm’s Form ADV.
In its complaint, Stifel alleged the advisors with raiding, conspiracy, misappropriation of confidential information and trade secrets, breach of the Protocol for Broker Recruiting, and other charges, according to the Finra panel’s award.
The complaint related to Stifel’s allegation that the advisors spent months planning and orchestrating a raid on one of Stifel’s branch offices with the intent to move all of Stifel’s client accounts serviced by that office to their newly formed registered investment advisor, Sapient Capital, according to the award. Stifel was seeking at least $50 million in compensatory damages.
The former Stifel advisors denied those allegations and then filed a counterclaim against Stifel.
Stifel was liable for and shall pay Knall and three other advisors $7 million in attorneys’ fees and is also liable and pay Lee Equity Partners, who was not named in the matter, $121,000 for discovery costs. Two other advisors had previously agreed to settlements of the dispute, according to the award.
Lee Equity is a private equity manager and Sapient Capital is one of the companies the manager has invested in, according to its website.
The two firms violated the Advisers Act and Reg BI by making misleading statements and failing to disclose conflicts to retail and retirement plan investors, according to the regulator.
Elsewhere, two breakaway teams from Morgan Stanley and Merrill unite to form a $2 billion RIA, while a Texas-based independent merges with a Bay Area advisory practice.
Analysis of four-year data shows average account balances nearly doubling among steady savers, with younger workers seeing the largest percentage growth.
Survey research shows just over half of Gen Xers satisfied with advice as retirement and economic anxieties take a toll.
Two reports reveal investor behavior including earlier participation of young Americans.
Orion's Tom Wilson on delivering coordinated, high-touch service in a world where returns alone no longer set you apart.
Barely a decade old, registered index-linked annuities have quickly surged in popularity, thanks to their unique blend of protection and growth potential—an appealing option for investors looking to chart a steadier course through today's choppy market waters, says Myles Lambert, Brighthouse Financial.
